Basis of Your Home and Other Property

There are some basic records that you will need to keep longer.  These include records for determining the basis of your home and other property.  You should keep these records until the period of limitations expires for the year in which you sell or otherwise dispose of the property.

Also, if you have a home-based business or you rent out part of your home, you will need to know the basis of your home in order to calculate depreciation.  Documentation showing the cost of the equipment and assets you use in your home-based business should also be kept for depreciation purposes, and to calculate any gain or loss on their sale or disposal.

The records you keep for your home should should show the purchase price, settlement or closing costs, and the cost of any improvements.  They should also show any casualty losses deducted and insurance reimbursements received. 

If you receive property in a nontaxable exchange, your basis of the property you receive is generally the same as the basis of the property you gave up.  You should keep records on the old property, as well as the new property, until the period of limitations expires for the year in which you sell or dispose of the new property.

Depreciation Calculations

You should keep a copy of your calculations of depreciation on your home, the improvements you have made, and on any other assets, such as rental property, with your tax return for the year, to support the amounts reported as depreciation expense.  You should also keep a copy of these depreciation calculations in your files for supporting the basis of your home and other assets, in order to carry forward the accumulated depreciation and adjusted basis from one year to the next, so that you will be able to determine the property’s adjusted basis at the time of selling your home, or selling or otherwise disposing of other assets.

Investments

Your records for investments such as stocks, bonds, and mutual funds, should enable you to determine your basis in an investment and whether you have a gain or loss when you sell it.  Keep your brokerage statements and documentation of any reinvested dividends, stock splits and dividends, load charges, and original issue discount (OID).